Placing KMT (
However, analysts said that foreign banks would be the most likely to win the largest share of these business opportunities.
Vice President Lien Chan (
"Foreign banks will be the biggest winner," said Peter Ho (
"However, foreign banks cannot yet perform their trust business in Taiwan," he said. "After the Trust Enterprise Law (信託業法) is enacted in the near future, foreign banks will be able to set up trust departments under their branches in Taiwan and carry out certain trust operations. But a sophisticated trust like the KMT's would have to wait for Taiwan's entry into the WTO. Only then would foreign banks be able to undertake such business."
According to financial analysts, many foreign banks, such as Union Bank of Switzerland and Citibank, have a long history of trust management.
In the local banking industry, probably only the Central Trust of China (
Last week, the Ministry of Finance announced that the Central Trust of China was to be merged with the Bank of Taiwan (
According to Ho, only a large-sized business would be able to manage the huge assets owned by the KMT. The merged bank would be in the position to do that.
But even local banks and the trust industry are unable to provide such services until passage of the draft Trust Enterprise Law.
However, once it is enacted, the opportunities will be large.
When someone entrusts his property to a trust enterprise, the enterprise charges a trust fee for the service, finance ministry officials said. The KMT's property is extensive and includes stocks and real estate.
The fee is often set between the trust client and the trustee based on their trust contracts. According to the ministry of finance officials, the draft Trust Enterprise Law does not stipulate an exact trust fee structure.
Normally the fee for the service would be a certain percentage of the property value entrusted by the client. That would then create a substantial source of revenue for those banks that provide trust services.
Trust enterprises abroad have charged fees at various rates, finance analysts said. The fee can be as high as 5 percent or as low as 0.01 percent. It all depends on the terms of the trust contract. In general, the more complicated the trust, the higher the fees, and vice versa.
If, for example, the entrusted property required highly skilled management, or was a high-risk property such as stocks, the fees would be higher. If the entrusted property only needed investing in government bonds or bank deposits, the fee would be much lower.
"The property the KMT wishes to entrust to the trust companies has to fit the definition of the Trust Law (信託法). It would also involve with the management of companies the KMT currently runs," said Chen Chong (陳沖), vice minister of the finance ministry.
The KMT is the controlling shareholder of 27 companies through its seven holding companies. It has also invested in three to four hundred other companies, in which it holds less than a 50 percent stake. Putting such complex property in trust would not be cheap, analysts said.
The total value of the seven holding companies currently owned by KMT is estimated at NT$168.2 billion (US$5.5 billion). It is this property that Liu Tai-ying (
Trust fees on such property charged at a higher fee structure of 2 percent or 3 percent would generate several billion NT dollars for the banking and trust industry.
The seven holding companies represent only part of the KMT's assets. According to unofficial estimates, the total value of the stocks of hundreds of companies and of the extensive real estate controlled by the KMT could be worth several times that of the seven holding companies, analysts said. It is this property that Vice President Lien Chan claims will be put in trust.
A number of local banks have undertaken more asset trust business recently. However, size and lack of experience may create opportunities for foreign banks to step in.
"It's more likely that the KMT trust case will be shared between foreign and domestic banks and trust companies," said Hu Yi-jing (
Local banks that have increased their trust operations recently include the Central Trust of China, Chinatrust Commercial Bank (中國信託商銀), Chiao Tung Bank (交通銀行), International Commercial Bank of China (中國國際商銀) and Grand Commercial Bank (萬通商銀).
"The huge size of the case means no single company would be able to undertake it alone," he said. "Also, domestic trust companies lack the experience and know-how that foreign trust companies have built up over decades. What's more likely is that foreign and local trust providers would team up into several groups and compete for the case."
Big business opportunities may loom large for the banking and trust industry for now. However, much still depends on the result of the presidential election in March, and the subsequent magnitude of the trust, analysts said.
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